Meat Goat Economic$

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Meat Goat Economic

• GEOFF BENSON, PhD
• Extension Economist
• Dept. of Ag. Resource Economics
• N.C. State University
• August, 2009

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Outline

• Why do you want to have goats?
• Who will buy your goats or goat meat?
• How will you produce your goats or goat meat?
• Are goats a good fit for your farm and family?
• Will it be profitable? -- Running the numbers

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WHAT IS SUCCESS?

• WHEN THE MOST IMPORTANT FAMILY AND BUSINESS
  GOALS ARE BEING MET
• How will meat goats contribute to your definition
  of success?

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1. Why Have Goats?
OR
FUN OR MONEY?
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Why Have Goats?

• Are Goats a Good Fit With
• Your Personal Goals
• Your Business Goals
• Goals of other family members

G. A. BENSON, ARE-NCSU
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Why Have Goats?

• How much money do you want to make from selling
  live goats or goat meat?
• How much time and money are you willing to
  invest?
• Write it down!
• Your answer helps determine the size and type of
  enterprise

GEOFF BENSON, ARE, NCSU
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Income Potential

• There is little published information from actual
  meat goat operations
• To base planning decisions on
• To use as benchmarks for evaluating farm
  performance
• Several Universities have developed goat
  enterprise budgets

G. A. BENSON, ARE-NCSU
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Meat Goat Enterprise Budgets, per Doe per year
Does Rev. Cost Neta
S. Carolina 180 Head 50 91 116 -25
Ohio1.5 X 130 kid 25 123 132 -9
Ohio1.5 X 170 kid 25 165 135 30
Ohio1.5 X 210 kid 25 207 138 69
Kentucky-Low Int. -- 77 75 2
Kentucky-Med Int. -- 95 98 -3
Kentucky-High Int. -- 111 124 -13
aNet Returns to Land, Management, Risk, Farm
Overhead
G. A. BENSON, ARE-NCSU
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Why the differences?

• Based on different production systems
• Differences in animal performance
• Differences in the cost categories included
• There is no standard budget methodology user
  beware!

G. A. BENSON, ARE-NCSU
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Farm Financial Performance Varies from Farm to
Farm

• Net Returns over Total Expense, Minnesota FINBIN
  data
• Cow-Calf, per cow, 2008
• Top 20 46, Bottom 20 -688
• Stockers, per head, 2007
• Top 20 65, Bottom 20 -223
• Dairy Net Farm Income per cow, Cornell
  University, 2007
• Top 10 1,985, Bottom 10 67

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Size Income

• Larger farm operations may be truly profitable
• Smaller operations can
• Depend on non-farm income either from choice of
  lifestyle or financial necessity
• Get bigger
• More of the same
• Develop value added activities
• All sizes -- Manage for profitability if net
  income is the primary motivation, especially cost
  control

G. A. BENSON, ARE-NCSU
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Economies of Size

• If you double the size of your goat herd
• It doesnt take twice as much time to feed or
  move goats from one field to the next, time and
  expense to take your goats to market, fencing,
  equipment, facilities, etc.
• You spread your fixed costs overhead
• You might get volume discounts on purchases
• But there can be diseconomies too, especially in
  marketing your product(s)
• ?Prediction Meat goats will become more like
  other commercial farm enterprises

G. A. BENSON, ARE-NCSU
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Value-added?

• Sell meat or meat products instead of the live
  goat
• Wholesale
• Restaurants
• Direct to consumer
• Farmers Markets
• On-farm sales
• Event Catering
• CSAs, etc.

G. A. BENSON, ARE-NCSU
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Value-added

• There are also Added Costs!
• Processing
• Wrapping, packaging, labeling
• Storage
• Sales and distribution costs
• Record keeping, office, etc.
• Cost of complying with regulations
• More of your time or cost of extra hired help
• An opportunity, not a magic bullet!
• Run the numbers!

G. A. BENSON, ARE-NCSU
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Other Financial Benefits

• Tax advantages for farmers
• Preferential sales tax rates
• Agricultural Use property tax rates
• Farm income tax rules
• All farming tax advantages have qualification
  requirements
• Do you qualify as a farm/farmer (acreage, gross
  income)?
• Are you farming for profit?
• Do you materially participate?

G. A. BENSON, ARE-NCSU
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2. Lots of Market Opportunities

• People NC 9.2 million, VA 7.8 mil.
• Personal Income NC 318 bil., VA 333 bil.
• Consumer trends
• Buy less on price, more on convenience
• Care how food is produced no GMOs, no added
  hormones, no antibiotics, organic, natural,
• Value special characteristics locally produced,
  sold direct, fresh, type or variety,
  heritage/nostalgia, etc.
• Demographic trends Changing racial ethnic mix,
  population growth, aging, more two-wage earner
  families, single head of households, etc.

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Who Are Your Customers?
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Know Your Customers

• When planning a new enterprise
• Helps you identify opportunities and challenges
  more clearly
• Helps you develop your product a marketing
  strategy to sell your product to the consumer
• Helps you develop a farm production plan
• For an existing business
• Helps you see new opportunities, see if your
  operation is meeting, exceeding or falling short
  of your customers expectations, helps you fine
  tune your marketing efforts

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Know Your Customers

• Live Sales
• Where will you sell your animals?
• What kind of animals does this market want? What
  premiums are available for certain
  characteristics frame size, weight, fleshiness,
  breed, sex, kosher or halal, number of head, etc.
• When does the market want them is there a
  seasonal pattern to prices? Are their ethnic
  holiday opportunities?

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Selling Meat Who are Your Customers

• Four Characteristics
• They want or need your type of product
• They have the ability to buy what you are
  selling
• They have decision making power over purchases
• They have ready access to your product or service

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Selling meat Some Key Questions

• 1. What type of person will buy my product?
• Race or ethnicity
• Attitudes towards food, health, production
  methods and animal welfare
• Income
• Age
• Marital Status
• Education

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Selling meat Some Key Questions

• 2. What are their buying habits?
• Who makes the purchasing decisions?
• Where do they make their purchases?
• How often do they buy?
• How much do they buy?
• What form of product do they preferlive, meat
  package size, type?
• 3. How much can or will they pay?

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How many potential customers are there in my
market area?
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More Marketing Questions

• 5. Who is my competition?
• Operations selling the same product
• Sellers with a similar product in a different
  market channel
• Sellers of a competing product that is a
  substitute
• 6. How will I compete?
• Price
• Product
• Service
• Quantity X Price Your revenue

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Competitor Analysis

• If you dont have a competitive advantage, dont
  compete
• Jack Welch
• Former CEO of
• General Electric

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3. How will you produce goats, meat?

• Revenue
• Type and number of animals
• Sale weight and form
• Time(s) of year
• Operating expenses
• Feed forages and supplements
• Health care
• Labor
• Processing /or Marketing
• Other utilities, repairs, services

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How will you produce goats, meat?

• What will you invest?
• Animals does, bucks, kids
• Buildings and facilities feeding, shelter
  handling, storage
• Fencing, water, lanes
• Cash flow is it feasible?
• Operating income and expenses
• New investments and asset sales
• Borrowing and debt repayment
• Non-farm income and family living needs
• New operations -- Make quarterly estimates
  through the start-up phase

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Fitting the pieces together
Customers Markets
Resources

Marketing, Distribution
Production
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Planning for Success

• Suck it and see
• This can work if the business venture is small in
  scope and the cost of failure is not
  significantif not, then more effort is required

Experience is the name everyone gives to their
mistakes -- Oscar Wilde
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Planning for Success

If you cant make a profit with a pencil, you
cant make a profit with a plow Anonymous
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Revenue Sources Amounts

• Kids sold live and/or as meat
• Kids sold for breeding
• Cull does bucks
• Does bucks sold as breeding stock
• Value of inventory changes, /-
• ?Calculate revenue per doe based on number of
  does exposed to the buck

G. A. BENSON, ARE-NCSU
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Goat Enterprise Expenses

• Operating or Variable Costs (Vary with scale of
  production)
• Feed Costs -- Pasture hay, Supplements --
  (Number of head X days fed X lb./day X cost/lb.)
• Health care -- (No of head X no. of treatments X
  cost per treatment)
• Hired labor -- (hours per day X 365)
• Processing /or Marketing -- (time, travel,
  advertizing, etc.)
• Other utilities, repairs, office, professional
  services

G. A. BENSON, ARE-NCSU
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More Expenses

• Fixed or ownership costs annual charges to
  recoup your investments in your goat enterprise,
  including buildings, equipment, facilities,
  fencing, pasture improvements, and breeding
  livestock
• Depreciation,
• Interest
• Property taxes
• Insurance

G. A. BENSON, ARE-NCSU
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Fixed or Ownership Costs

• Average annual depreciation charge
• New Cost - Salvage Value
• Years of life
• Average annual interest charge
• New Cost Salvage X Interest rate
• 2

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More Expenses

• Overhead Expenses
• Specific to goats, e.g., goat association
  memberships and subscriptions
• Farm overhead -- general to farming, e.g.,
  accounting and tax preparation, legal, land cost
  (ownership cost or rent), etc.
• Value of your and your family members
  contributions (opportunity cost)
• Chore labor time
• Management time
• Money you invested in the goat enterprise

G. A. BENSON, ARE-NCSU
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Expenses Decision Making

• Fixed or ownership costs to be recouped
• Will these be new investments?
• If you have existing equipment facilities, do
  they have alternative uses or value?
• Land cost who pays?
• Lifestyle farm your cost
• Land as an investment your cost
• Farming for profit farm enterprises must
  justify the land investment or land rent
• Profit v. Cash Flow
• Budgets do not consider cash flow issues, such as
  how to finance new investments, make debt
  principal payments and family living withdrawals

G. A. BENSON, ARE-NCSU
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Consider Risk

• Probability or chance of an event
• Exposure financial impact if an event occurs
• Sources
• Production
• Prices and market risk
• Financial
• Legal, Business, regulatory, etc.
• Human, including the 5Ds

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What Are Your Figures?
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Are Goats a Good Fit?

• Lifestyle or supplementary farm enterprise
• Fitting and showing, pleasure
• Controlling brush and weeds
• Using underutilized pasture species, e.g., with
  cattle
• Farm Income
• Breeding stock production
• Commercial meat production live or meat sales

• Income Goals
• Gain tax advantages
• Cover Cash costs
• Make a true profit

G. A. BENSON, ARE-NCSU
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Once your are in production, Is it working?

• Controlling -- Evaluating the results
• Set standards or targets
• Measure performance keep records!
• Compare actual performance to target or benchmark
• Take corrective action promptly if performance is
  below target

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Summary

• Why have goats what are your family business
  and personal goals?
• Who are your customers, Where will you sell, what
  do they want, how much do they want, what will
  they pay?
• Develop a farm production and marketing plan
  geared to your market

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Summary

• Develop projections based on realistic
  expectations of farm and financial performance
• Profitability
• Cash flow
• Are goats a good fit for your operation?
• Monitor and evaluate how your farm and business
  plan is working
• Production performance
• Financial performance

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Summary

• If its easy, fun or can be done from the seat
  of a tractor, there aint no money in it
• Anonymous Cowboy

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Remember the Economic






Photo courtesy of the Department of Animal
Science, Oklahoma State University, Stillwater,
Oklahoma.
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Geoff Benson

• Phone [phone]
• Fax [phone]
• E-mail Geoff_Benson_at_ncsu.edu
• Web page
• http//www.ag-econ.ncsu.edu/ faculty/benson/bens
  on.html